The dollar bounced against the yen on Friday, as a report that Japan may unveil a supplementary budget lifted risk appetite and helped the greenback pare earlier losses. The dollar was up 0.1 percent at 121.24 yen.
The US currency had earlier dipped to as low as 120.29 after the Bank of Japan stood pat on monetary policy, disappointing some speculators who had bet that the central bank would expand its already massive stimulus.
The greenback received a reprieve, however as Tokyo stocks pulled out of the red following a report by the Nikkei newspaper that Japan's government is considering compiling a 3 trillion yen ($24.77 billion) extra budget in preparation for the trans-Pacific trade pact.
The safe-haven yen often moves in inverse correlation with Japanese stocks, falling when investor risk appetite improves.
All the same, the dollar was capped by caution ahead of BoJ Governor Haruhiko Kuroda's press conference at 0630 GMT when he is set to elaborate on the central bank's decision.
The Japanese central bank appeared confident that a tight job market will lift wages and consumption sufficiently to push inflation towards its 2 percent target.
"The reaction by dollar/yen to the BoJ decision was smaller than I expected. While the view among economists may have been split down the middle regarding what the BoJ would do today, market players seemed to have mostly priced in the possibility of no easing," said Masafumi Yamamoto, a senior strategist at Monex in Tokyo.
The euro was steady at $1.0981 after gaining about 0.5 percent overnight on an unexpected improvement in euro zone economic sentiment and signs of faster-than-expected inflation in Germany.
The data helped the common currency bounce from a 2-1/2-month low of $1.0896 struck midweek following the Federal Reserve's hawkish stance.
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